Ground rent, and justice

December 12, 2006

The powerful and thoroughly documented expose on abuses in Baltimore's archaic system of ground rents, by Fred Schulte and June Arney of The Sun, raises four key points:

People who fall behind on ground rents should not be put in danger of losing their houses. It is an outrage that an unpaid debt of as little as a few hundred dollars can lead to the loss of a home. With a mortgage foreclosure, the defaulting homeowner at least gets the difference between the debt and the sales price of the house. That doesn't happen with a ground rent "ejectment," where the unfortunate victim gets nothing; it should more properly be called a confiscation. The law should be changed to allow the owner of the ground rent fair compensation in the event of a default, but no more.

It is astonishing that ground rents are not recorded the way mortgages are - this practically invites abuses. The Sun series, which concludes today, describes homeowners who have been unable to find the people who hold their ground rent and others who have bought houses without fully realizing the implications of a ground rent arrangement. It seems clear that some ground rent specialists make a practice of sandbagging unwary homeowners, essentially hiding until they have unknowingly built up a debt that can lead to default. Ground rents should be recorded, and homebuyers should be appraised of the consequences of a ground rent before settlement. They should always have the option of buying out the ground rent.

Ground rents served a purpose in the 19th century, when they became popular, but they don't anymore. Rehabbers in newly fashionable districts acknowledge that the ground rents they are imposing on the houses they sell do nothing to drive down the sales price - these are simply money-making gimmicks. The legislature should outlaw new ground rents.

The Sun series paints a disturbingly black-and-white picture of the city's court system. The courts act as though their only role is to enable the maneuvers of unscrupulous business people, as long as they have lawyers who are well-versed in the intricacies of the largely opaque ground-rent laws. Judges would do well to remember that justice is also supposed to be one of their goals.

The outgoing state attorney general, J. Joseph Curran Jr., has directed his office to launch an investigation. This is commendable, if overdue. Clearly, the legislature will have to act once it reconvenes. It's time to stop the abuse.